S. Korea eases guideline for bank capital ratio

SEOUL, May 28 (Yonhap) -- South Korea has lowered its guideline for banks'
minimum capital ratio to 10 percent from 12 percent in an effort to spur lenders
to make more loans, the financial watchdog said Thursday.

Lenders were urged to keep their capital adequacy ratios above 12 percent to
cushion themselves from a rise in bad debts. The ratio measures the percentage of
a bank's capital to its risk-weighted credit.
"The move aims to encourage local banks to increase their lending to households
and smaller companies through eased burdens to bolster their capital bases," the
Financial Supervisory Service (FSS) said.
The capital adequacy ratio of 18 commercial and state banks averaged 12.19
percent as of the end of December, up 1.33 percentage points from three months
earlier.
The watchdog also said it will advise banks to keep the so-called tier-1 capital
ratio, a barometer of a bank's core financial health, above 7 percent from the
current 8 percent.
Local banks have faced the conflicting tasks of bolstering their financial health
while expanding loans to cash-strapped companies.
In March, the government launched a 20 trillion won (US$15.9 billion) bank
recapitalization fund to bolster their capital base and encourage risk-averse
lenders to expand loans.
sooyeon@yna.co.kr
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